Entrepreneurs: the post-moneyvaluation of your last round is a standard bit of info to give to new investors, even prior to the first meeting (if they ask for it prior to the meeting). If they like your idea, they may decide whether to pursue it, based in part on how high your last valuation was. MORE

” This is someone who has done it before — raised money, done deals, worked with startups. It’s easier for many people (especially developers) to post a status update than to write an email. Don’t choose your investors based on valuation. Raise as little money as possible when you first start. Once you have some traction, raise more money than you need but not more than you know what to do with. 10M post-moneyvaluation = $100M target. MORE

at a startup that has already raised $5 million the chances of you making your retirement money on that company is EXTREMELY small. This isn’t shabby money. Anyway, I hope this post hasn’t been too harsh. I’m not all about the money. MORE

[Entrepreneurs: read all the way to the bottom of this post; there are different situations that can look confusingly similar, and it''s important to distinguish among them.]. Most, smart investors will ask you for the post-moneyvaluation of your last round of financing at the conclusion of your first meeting (i ndeed, if a VC doesn''t ask for it during your initial meeting, it''s usually a sign they''ve already decided to pass). . MORE

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m postmoneyvaluation. ” They are running out of money. The term sheet converts all the convertible debt into a post-moneyvaluation of $100, essentially making the convertible debt worthless. MORE

Let’s assume a post-moneyvaluation of $4m. The postmoneyvaluation after the warrant is exercised is $6.25m (2.5m / 0.40). Bottom line – the investor is proposing a $3.75m pre-money / $6.25m post-money for a total investment of $2.5m. Question: In a Series A, the investor is proposing a preferred stock with warrants. MORE

A few of them have done good up rounds and the easiest way to describe the magnitude is to talk about the valuation multiple. As a refresher, the post-moneyvaluation is calculated as the pre-moneyvaluation plus the amount of money invested.). MORE

We know the difference between pre-money and post-moneyvaluations. "The elevator to success is out of order. You'll have to use the stairs.one step at a time." ~Joe Joe Girard. As a community, I think entrepreneurs have gotten more knowledeable over the years. MORE

At Brooklyn Bridge Ventures , I want to be part of the first money to go into a company, no matter what you call it. If their entry valuation is that much lower because more dollars are in the Series A, they will still be able to make their return. in seed money instead of $1.5M MORE

The company raised $41 million from Sequoia and other investors at a post-moneyvaluation of $98 million. And it’s probably worth mentioning that the Valley is littered with the skeletons of high-profile startups that launched with big ambitions and lots of money. MORE

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. Mark’s post is one of the first in this cycle that I’ve seen from a VC giving clear, actionable advice. But, more importantly, is another point Mark buries later on, which includes an awesome post of his from 2010. But, as you raise more money at higher valuations, this will normalize. MORE

VC Experts , the premier provider of valuation & deal term data of private company financing transactions, recently released their Q3 2011 Life Sciences Valuation & Deal Term report. The report, utilizing data found in the Valuation & Deal Term Database, includes details about the investments, terms, and estimated post-moneyvaluation data for companies in the Life Sciences sector who raised capital in Q3 2011. MORE

The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e. I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding). MORE

Jeremy and Josh 's thoughts on valuation are well worth reading. Not only should founders be mindful of valuation issues, but also need to be thoughtful about capital structure and shareholder mix. Too much money too early and too many people too early interferes with the productive process of iteration. Too High "A" Round Post-MoneyValuations While a self-serving argument, an equally challenging problem is a too high "A" round post-money. MORE

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then? MORE

I’d recently made an offer to invest in a company Troy was an investor in and the entrepreneur and I got tangled up in the definition of pre and postmoney in the context of existing convertible debt. In this case there were multiple traunches of convertible debt at different valuation caps. Given the magnitude of the convertible debt, the way the debt was handled had a significant impact on the postmoneyvaluation dynamics. MORE

This is the first of a six part series on different methods used by angel investors to arrive at pre-money startup valuations. Detailed descriptions will be published over the next few weeks: The Scorecard Method: This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-moneyvaluation of the target. The Cayenne Valuation Calculator. MORE

When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation. MORE

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-moneyvaluation.” MORE

Investors like to require that an unissued option pool is in the pre-moneyvaluation calculation when they put money into early stage companies. If you don't entirely understand what I am talking about here, go click on that link at the start of the post. This post is about how to size the option pool. Let's say you are raising $1mm at $4mm pre-money. And the investors want the option pool to be in the pre-moneyvaluation. MORE

Entrepreneurs sometimes assume an initial agreement with an Angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-moneyvaluation.” MORE

This would mean that last year when Atomico and Accel Partners invested $42 million into the company, the postmoneyvaluation was exactly $210 million. The Finnish Arvopaperi magazine has announced the ownership structure of Rovio, the creators of Angry Birds. MORE

We recently started a series of posts on establishing the pre-moneyvaluation of pre-revenue startup companies for purposes of investment by seed and startup investors. It is one of the useful methods for establishing the pre-moneyvaluation of pre-revenue startup ventures. The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-moneyValuation. (in Post-moneyValuation = $ 2.125 million. MORE

But mainly we did it because these corporate VCs were among the only groups willing to invest at PayPal’s somewhat inflated post-moneyvaluation, during the middle of the dot-com crash when traditional VCs pulled back sharply and other sources of funding were constrained. MORE

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. It’s worth reading his post to understand the problem. In the old days VCs funded off of a “pre-money” valuation. Inexperienced VCs get caught in the pre-money vs. post-money trap. MORE

There is much talk these days that startup valuations have decreased and may continue to do so and that the amount of time it takes to fund raise may take longer. As I have pointed out in previous posts , 91% of VCs surveyed believe prices are declining (30% believe substantially) and 77% believe that funding will take longer than it has in the past. How much money have you personally or your friends/family invested? How Reasonable Was Your Last Valuation? MORE

E-commerce sites are being "pinned" to Pinterest and "tweeted" on Twitter, providing key word-of-mouth marketing to the consumer, by the consumer, that is not only increasing brand equity but also post-moneyvaluations. For instance, privately held/venture capital backed e-commerce sites like Gilt Groupe, Chegg, and Etsy have valuations above average; and potential competitor Plum District is not far behind. MORE

I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ). In other words, it shows both pre-money and post-money very clearly. For example, cell E2 is the spot to put in the negotiated pre-moneyvaluation. The green box at row 45 just provides a nice double check on post-moneyvaluation calculations. This cap table can be used by a pre-funded startup and then a financing can be layered in. MORE

The other day, Mark Suster wrote a critically important post titled One Simple Paragraph Every Entrepreneur Should Add to Their Convertible Notes. Most notes are ambiguous as to whether they convert on a pre-money or a post-money basis. If the entrepreneur knows this and is using it proactively so they get a higher post-moneyvaluation, that’s fair game. pre ($25m post).” MORE

It was regarding entrepreneurs not wanting to accept a 2x return clause on notes and the high valuation caps on those notes that are running around the Silicon Valley right now. You could take companies in the unicorn club and divide their current post-moneyvaluations by 10,000. MORE

Young entrepreneurs are so focused on the short run--get the money and get the business started--that they don’t sit down and do the math. Follow-on investors New investors Post-moneyvaluation Management stake (%) Management value ($) Next Round (date?) MORE

This is a fundamental issue that does, indeed, boil down to understanding the post-moneyvaluation of a company. At its core, this issue points to the lack of understanding about the importance of post-moneyvaluation by both entrepreneurs and investors. The most serious unintended consequence occurs from “note waterfalls”— converting multiple notes that have multiple valuation caps. MORE

They want to raise more money, and VCs are offering them money at a high valuation. VCs know what they are doing and almost always invest with a financial instrument – preferred shares – that protects them even when the valuation is very high. MORE

I was reading Danielle Morrill’s blog post today on whether one’s “ Startup Burn Rate is Normal. Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it Gross burn is the total amount of money you are spending per month. Net burn is the amount of money you are losing per month. We’re going to start aggressively spend money on marketing our product. Valuation. MORE

It has even gone so far that we now have evocative headlines in the tech press such as “ Buy or Die ,” which is what got me thinking about this post. Let’s assume $2 million in seed money. They founded their last company with no money in their pocket. MORE

Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. It was accept the terms or go into bankruptcy so we took the money. Industry standard post your first round of funding will be 15-20%. MORE

Entrepreneurs will name the pre-money or post-moneyvaluation, and sometimes they even lead with the pricing. That’s a lot of money , you think. You might even end up raising more money than you expected, and that could impact the price positively. I receive lots of pitches, and one of the things I notice is that sometimes these pitches are very clear on pricing. MORE

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then? MORE

The hard and unforgiving facts are that the majority of all angel-backed ventures fail completely, losing all the money of all the investors. original post can be found on Quora @ [link] *. Because of the economic realities of angel investing, not greed. MORE

He has made his money as an entrepreneur and now travels alot but will be available for consultancy for us. The terms associated with this matter – if the time he has to exercise the warrants is long enough (say 10 years) then it’s likely he’ll never have to shell out the money to actually buy the stock. It sounds like your postmoneyvaluation is around £ 500,000 (if £24,000 is about 5% of the company). MORE

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-moneyvaluations. That is, the valuation of the company prior to the investment of new capital. MORE

As valuations are extended and it feels very late in this cycle, I feel that the risk of this happening to entrepreneurs is quite high now. —————————————– In the current valuation environment many entrepreneurs seem to believe that only two numbers matter in a financing: the amount of the raise and the dilution. The number everyone seems to be forgetting about is the post-moneyvaluation. MORE

When I first started out as a VC nearly 9 years ago, most early stage company valuations were expressed as pre-moneyvaluations. That is, the valuation of the company prior to the investment of new capital.

The company raised $41 million from Sequoia and other investors at a post-moneyvaluation of $98 million. And it’s probably worth mentioning that the Valley is littered with the skeletons of high-profile startups that launched with big ambitions and lots of money.

[Entrepreneurs: read all the way to the bottom of this post; there are different situations that can look confusingly similar, and it''s important to distinguish among them.]. Most, smart investors will ask you for the post-moneyvaluation of your last round of financing at the conclusion of your first meeting (i ndeed, if a VC doesn''t ask for it during your initial meeting, it''s usually a sign they''ve already decided to pass). .

Entrepreneurs: the post-moneyvaluation of your last round is a standard bit of info to give to new investors, even prior to the first meeting (if they ask for it prior to the meeting). If they like your idea, they may decide whether to pursue it, based in part on how high your last valuation was.

A few of them have done good up rounds and the easiest way to describe the magnitude is to talk about the valuation multiple. As a refresher, the post-moneyvaluation is calculated as the pre-moneyvaluation plus the amount of money invested.).

Jeremy and Josh 's thoughts on valuation are well worth reading. Not only should founders be mindful of valuation issues, but also need to be thoughtful about capital structure and shareholder mix. Too much money too early and too many people too early interferes with the productive process of iteration. Too High "A" Round Post-MoneyValuations While a self-serving argument, an equally challenging problem is a too high "A" round post-money.

We recently started a series of posts on establishing the pre-moneyvaluation of pre-revenue startup companies for purposes of investment by seed and startup investors. It is one of the useful methods for establishing the pre-moneyvaluation of pre-revenue startup ventures. The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-moneyValuation. (in Post-moneyValuation = $ 2.125 million.

The hard and unforgiving facts are that the majority of all angel-backed ventures fail completely, losing all the money of all the investors. original post can be found on Quora @ [link] *. Because of the economic realities of angel investing, not greed.

As valuations are extended and it feels very late in this cycle, I feel that the risk of this happening to entrepreneurs is quite high now. —————————————– In the current valuation environment many entrepreneurs seem to believe that only two numbers matter in a financing: the amount of the raise and the dilution. The number everyone seems to be forgetting about is the post-moneyvaluation.

I am reminded of this problem every time my firm does a financing where a note went before us but more specifically I was reminded by this great post by Brad Feld to talk about the pre-money vs. post-money conversion issue. It’s worth reading his post to understand the problem. In the old days VCs funded off of a “pre-money” valuation. Inexperienced VCs get caught in the pre-money vs. post-money trap.

This is a fundamental issue that does, indeed, boil down to understanding the post-moneyvaluation of a company. At its core, this issue points to the lack of understanding about the importance of post-moneyvaluation by both entrepreneurs and investors. The most serious unintended consequence occurs from “note waterfalls”— converting multiple notes that have multiple valuation caps.

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m postmoneyvaluation. ” They are running out of money. The term sheet converts all the convertible debt into a post-moneyvaluation of $100, essentially making the convertible debt worthless.

We know the difference between pre-money and post-moneyvaluations. "The elevator to success is out of order. You'll have to use the stairs.one step at a time." ~Joe Joe Girard. As a community, I think entrepreneurs have gotten more knowledeable over the years.

When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation.

Jeremy and Josh 's thoughts on valuation are well worth reading. Not only should founders be mindful of valuation issues, but also need to be thoughtful about capital structure and shareholder mix. Too much money too early and too many people too early interferes with the productive process of iteration. Too High "A" Round Post-MoneyValuations While a self-serving argument, an equally challenging problem is a too high "A" round post-money.

We recently started a series of posts on establishing the pre-moneyvaluation of pre-revenue startup companies for purposes of investment by seed and startup investors. It is one of the useful methods for establishing the pre-moneyvaluation of pre-revenue startup ventures. The concept is simply…since: Return on Investment (ROI) = Terminal (or Harvest) Value ÷ Post-moneyValuation. (in Post-moneyValuation = $ 2.125 million.

The hard and unforgiving facts are that the majority of all angel-backed ventures fail completely, losing all the money of all the investors. original post can be found on Quora @ [link] *. Because of the economic realities of angel investing, not greed.

I’d recently made an offer to invest in a company Troy was an investor in and the entrepreneur and I got tangled up in the definition of pre and postmoney in the context of existing convertible debt. In this case there were multiple traunches of convertible debt at different valuation caps. Given the magnitude of the convertible debt, the way the debt was handled had a significant impact on the postmoneyvaluation dynamics.

VC Experts , the premier provider of valuation & deal term data of private company financing transactions, recently released their Q3 2011 Life Sciences Valuation & Deal Term report. The report, utilizing data found in the Valuation & Deal Term Database, includes details about the investments, terms, and estimated post-moneyvaluation data for companies in the Life Sciences sector who raised capital in Q3 2011.

But mainly we did it because these corporate VCs were among the only groups willing to invest at PayPal’s somewhat inflated post-moneyvaluation, during the middle of the dot-com crash when traditional VCs pulled back sharply and other sources of funding were constrained.

E-commerce sites are being "pinned" to Pinterest and "tweeted" on Twitter, providing key word-of-mouth marketing to the consumer, by the consumer, that is not only increasing brand equity but also post-moneyvaluations. For instance, privately held/venture capital backed e-commerce sites like Gilt Groupe, Chegg, and Etsy have valuations above average; and potential competitor Plum District is not far behind.

The other day, Mark Suster wrote a critically important post titled One Simple Paragraph Every Entrepreneur Should Add to Their Convertible Notes. Most notes are ambiguous as to whether they convert on a pre-money or a post-money basis. If the entrepreneur knows this and is using it proactively so they get a higher post-moneyvaluation, that’s fair game. pre ($25m post).”

Entrepreneurs will name the pre-money or post-moneyvaluation, and sometimes they even lead with the pricing. That’s a lot of money , you think. You might even end up raising more money than you expected, and that could impact the price positively. I receive lots of pitches, and one of the things I notice is that sometimes these pitches are very clear on pricing.

Investors like to require that an unissued option pool is in the pre-moneyvaluation calculation when they put money into early stage companies. If you don't entirely understand what I am talking about here, go click on that link at the start of the post. This post is about how to size the option pool. Let's say you are raising $1mm at $4mm pre-money. And the investors want the option pool to be in the pre-moneyvaluation.

Mark Suster wrote a great post yesterday titled The Resetting of the Startup Industry. Mark’s post is one of the first in this cycle that I’ve seen from a VC giving clear, actionable advice. But, more importantly, is another point Mark buries later on, which includes an awesome post of his from 2010. But, as you raise more money at higher valuations, this will normalize.

Entrepreneurs sometimes assume an initial agreement with an angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-moneyvaluation.”

The liquidation preference means what is sounds - namely that preferred stock holders with this right get all of their money back (i.e. I get the same question a lot from entrepreneurs raising equity capital (venture capital or angel funding).

Entrepreneurs sometimes assume an initial agreement with an Angel is a commitment, so they start spending before any money is received. The price is the percent of ownership given to the investor, calculated as “investment/post-moneyvaluation.”

At Brooklyn Bridge Ventures , I want to be part of the first money to go into a company, no matter what you call it. If their entry valuation is that much lower because more dollars are in the Series A, they will still be able to make their return. in seed money instead of $1.5M

He has made his money as an entrepreneur and now travels alot but will be available for consultancy for us. The terms associated with this matter – if the time he has to exercise the warrants is long enough (say 10 years) then it’s likely he’ll never have to shell out the money to actually buy the stock. It sounds like your postmoneyvaluation is around £ 500,000 (if £24,000 is about 5% of the company).

It was regarding entrepreneurs not wanting to accept a 2x return clause on notes and the high valuation caps on those notes that are running around the Silicon Valley right now. You could take companies in the unicorn club and divide their current post-moneyvaluations by 10,000.

This is the first of a six part series on different methods used by angel investors to arrive at pre-money startup valuations. Detailed descriptions will be published over the next few weeks: The Scorecard Method: This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-moneyvaluation of the target. The Cayenne Valuation Calculator.

Let’s assume a post-moneyvaluation of $4m. The postmoneyvaluation after the warrant is exercised is $6.25m (2.5m / 0.40). Bottom line – the investor is proposing a $3.75m pre-money / $6.25m post-money for a total investment of $2.5m. Question: In a Series A, the investor is proposing a preferred stock with warrants.

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then?

at a startup that has already raised $5 million the chances of you making your retirement money on that company is EXTREMELY small. This isn’t shabby money. Anyway, I hope this post hasn’t been too harsh. I’m not all about the money.

It has even gone so far that we now have evocative headlines in the tech press such as “ Buy or Die ,” which is what got me thinking about this post. Let’s assume $2 million in seed money. They founded their last company with no money in their pocket.

There is much talk these days that startup valuations have decreased and may continue to do so and that the amount of time it takes to fund raise may take longer. As I have pointed out in previous posts , 91% of VCs surveyed believe prices are declining (30% believe substantially) and 77% believe that funding will take longer than it has in the past. How much money have you personally or your friends/family invested? How Reasonable Was Your Last Valuation?

Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If you’re wildly successful early on or if they help you achieve a great valuation they actually pay a significant price for their eventual stock even though they took much more risk than a future investor and backed you early. People seem concerned about valuation. Him: They think $14 post is a bit too high. Why don’t they set a valuation then?

They want to raise more money, and VCs are offering them money at a high valuation. VCs know what they are doing and almost always invest with a financial instrument – preferred shares – that protects them even when the valuation is very high.

This would mean that last year when Atomico and Accel Partners invested $42 million into the company, the postmoneyvaluation was exactly $210 million. The Finnish Arvopaperi magazine has announced the ownership structure of Rovio, the creators of Angry Birds.

” This is someone who has done it before — raised money, done deals, worked with startups. It’s easier for many people (especially developers) to post a status update than to write an email. Don’t choose your investors based on valuation. Raise as little money as possible when you first start. Once you have some traction, raise more money than you need but not more than you know what to do with. 10M post-moneyvaluation = $100M target.

Young entrepreneurs are so focused on the short run--get the money and get the business started--that they don’t sit down and do the math. Follow-on investors New investors Post-moneyvaluation Management stake (%) Management value ($) Next Round (date?)

Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. It was accept the terms or go into bankruptcy so we took the money. Industry standard post your first round of funding will be 15-20%.

I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ). In other words, it shows both pre-money and post-money very clearly. For example, cell E2 is the spot to put in the negotiated pre-moneyvaluation. The green box at row 45 just provides a nice double check on post-moneyvaluation calculations. This cap table can be used by a pre-funded startup and then a financing can be layered in.

I was reading Danielle Morrill’s blog post today on whether one’s “ Startup Burn Rate is Normal. Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it Gross burn is the total amount of money you are spending per month. Net burn is the amount of money you are losing per month. We’re going to start aggressively spend money on marketing our product. Valuation.